Rhode Island ‘Expired Debt Act’ More Than Name Implies

On Jan. 7, the Expired Debt Act (EDA) was introduced in the Rhode Island House of Representatives and referred to the House Committee on Judiciary. The bill was introduced by State Representatives Shekarchi, Solomon, Regunberg, McEntee, and Craven.

Since 2007, Rhode Island has had its own Fair Debt Collection Practices Act (RIFDCPA) that is, for the most part, identical to its federal counterpart. The EDA, however, introduces new definitions and restrictions related to debt collection.

The EDA defines a “collector” as “a person collecting or attempting to collect an alleged debt arising out of a consumer transaction.” The definition is not restricted by any exclusions other than the definition of a “consumer transaction,” which is “any transaction involving a person seeking or acquiring real or personal property, services, money, or credit for personal, family, or household purposes.” The EDA does not define “debt” and does not explicitly adopt any definitions from the RIFDCPA.

Thus, compared to the RIFDCPA, the EDA applies to:

Creditors, and creditors’ employees, collecting their own debts;

Attorneys at law;

Federal and state employees collecting debt in their official capacity;

Persons serving legal process in connection with the judicial enforcement of a debt;

Nonprofit organizations that perform consumer credit counseling and assist consumers in the liquidation of debts by receiving payments from the consumer and distributing the amounts to creditors;

Persons collecting or attempting to collect a debt owed or due or asserted to be owed or due another to the extent the activity:

is incidental to a bona fide fiduciary obligation or a bona fide escrow arrangement, or;

concerns a debt that was originated by the person;

concerns a debt that was not in default at the time it was obtained by the person or in connection with a debt secured by a mortgage, when first serviced by the person;

concerns a debt obtained by the person as a secured party in a commercial credit transaction involving the creditor.

As the name implies, the legislation provides that if a debt is beyond the statute of limitations, a “collector” must advise the debtor in every communication that: 1) the statute of limitations has expired; 2) the debtor may assert the expiration as a defense in a collection action; and 3) entering into a payment agreement or making a payment may revive the debt and prevent assertion of the statute of limitations defense.

The EDA contains “prohibited practices” that are similar, but not identical, to various requirements and restrictions in the RIFDCPA. Because of the differences and the fact that some persons would be subject to both acts, the EDA creates an exceptional opportunity for conflict, confusion and resulting litigation.

Notably, the EDA prohibits a collector from initiating any contact with a debtor unless the collector possesses “verifiable” documentation of ownership of the debt, including a copy of the signed contract of the original debt, the final account statement of the debt, and written documentation that the collector has the right to collect on the debt.

Yesterday, the bill was considered before the Rhode Island House Judiciary Committee. Testimony was taken including that from DBA International, the trade organization of debt buying companies. Industry stakeholders ACA International, Encore Capital Group, PRA Group and DBA International also submitted written testimony outlining their concerns with the bill.

“DBA International acknowledges the importance of the issue and appreciates the spirit behind the Expired Debt Act (HB 7028),” said Jan Stieger, executive director of DBA International. “However, this bill needs revisions to lessen unnecessary harm to the industry without lessening what will be a powerful consumer protection bill when amended. We have communicated our willingness to work with the sponsor.”

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Eric Rosenkoetter is based in Maurice Wutscher’s Austin office. For many years, he has focused his practice on various aspects of financial services law. As a litigation attorney, he has conducted every aspect of the litigation process, including countless depositions, motion proceedings, bench and jury trials, and appeals in various courts. In addition, he has significant experience as a compliance and transactional attorney, providing strategic, business growth, legislative, compliance and regulatory advice to national corporations and trade associations. For example, he has drafted consumer contracts and disclosures designed to state-specific statutory requirements, and developed “Best Practices” guides and state-by-state compliance grids, for national financial services companies. He also conducted research and crafted a metrics report for a national trade association with analysis designed to counter the claims of advocacy groups. Eric’s experience also includes working for a national corporation as Executive Counsel, Chief Compliance and Ethics Officer, and Director of Legislative Affairs, and as a federal lobbyist and Director of Government and Public Affairs for a national financial services trade association. In the government sector, Eric presided over approximately 6,000 state administrative hearings, served as a staff attorney for the Missouri Senate, and handled litigation in 33 counties as a regional managing attorney. Eric frequently speaks to audiences on topics relevant to the financial services industry and related advocacy initiatives.